Local Government Revenue and Expenditure: Second Quarter Local Government Section 71 report for the period: 1 July 2018 – 31 December 2018
South African municipalities have on aggregate spent 41.3 per cent, or R182.6 billion, of the total adopted expenditure budget of R441.9 billion as at 31 December 2018. In respect of revenue, aggregate billing and other revenue amounted to 48.4 per cent, or R211.3 billion, of the total adopted revenue budget of R436.9 billion.
These figures are among those released today in the National Treasury’s local government’ revenue and expenditure data for the second quarter* of the 2018/19 financial year, as well as spending on conditional grants for the same period. This report covers the second quarter of the municipal financial year ending on 31 December 2018.
The report is part of the In-year Management, Monitoring and Reporting System for Local Government (IYM), which enables provincial and national government to exercise oversight over municipalities, and identify possible problems in implementing municipal budgets and conditional grants.
In-year reporting is institutionalised with most municipalities that consistently produce quarterly financial reports. The reporting facilitates transparency, better in-year management as well as the oversight of budgets. This makes these reports management tools and early warning mechanisms for councils, provincial legislatures and officials in order to monitor and improve municipal performance.
Key trends:
Aggregate trends
1. Of the adopted operating expenditure budget amounting to R368.5 billion, R162.7 billion or 44.1 per cent was spent by 31 December 2018.
2. Municipalities have adopted the budget for salaries and wages expenditure at R113.6 billion, which constitutes 30.8 per cent of their total operational expenditure budget of R368.5 billion. As at 31 December 2018, spending is 46.3 per cent, or R52.6 billion.
3. In the period under review, capital expenditure amounted to R20.0 billion, or 27.2 per cent, of the adopted capital budget of R73.4 billion. This is significant under performance for the second quarter.
4. Aggregated year-to-date total expenditure for metros amounts to R110.5 billion, or 43.2 per cent, of their adopted budget expenditure of R256.0 billion. The aggregated adopted capital budget for metros in the 2018/19 financial year is R38.9 billion, of which 23.3 per cent, or R6.1 billion, has been spent as at 31 December 2018.
5. When billed revenue is measured against their adopted budgets, the performance of metros shows surpluses across all four core services of the second quarter of 2018/19. This does not take into account the collection rate:
- Water revenue billed was R17.3 billion against expenditure of R13.9 billion;
- Electricity revenue billed was R39.0 billion against expenditure of R36.3 billion;
- The revenue billed for waste water management was R5.9 billion against expenditure of R3.7 billion, and
- Levies for waste management billed were R4.7 billion against expenditure R3.9 billion.
6. As at 31 December 2018, aggregated revenue for secondary cities is 47.6 per cent or R28.9 billion of their total adopted revenue budget of R60.7 billion for the 2018/19 financial year. The year-to-date operating expenditure level of the secondary cities is 41.0 per cent or R22.1 billion of the total adopted operating budget of R54 billion for the 2018/19 financial year.
7. Capital spending levels for secondary cities are low at an average of 31.0 per cent or R2.7 billion of the adopted capital budget of R8.6 billion.
8. The performance against the adopted budget for the four core services for the secondary cities of the second quarter 2018/19 also shows surpluses against billed revenue without taking into account the collection rate:
- Water revenue billed was R3.5 billion against expenditure of R2.8 billion;
- Electricity revenue billed was R9.9 billion against expenditure of R8.2 billion;
- The revenue billed for waste water management was R1.5 billion against expenditure of R787 million; and
- Levies for waste management billed were R1.3 billion against expenditure of R832 million.
9. Aggregate municipal consumer debts amounted to R184.7 billion (compared to R138.2 billion reported in the second quarter of 2017/18) as at 31 December 2018. Government accounts for 5.3 per cent or R9.8 billion (R7.4 billion reported in the second quarter of 2017/18) of the total outstanding debtors. Households represents the largest component of this debt at 73.8 per cent or R136.3 billion (71.8 per cent or R99.2 billion in the second quarter of the previous year).
10. It needs to be acknowledged that not all the outstanding debt of R184.7 billion is realistically collectable, as these amounts are inclusive of debt older than 90 days (historic debt that has accumulated over an extended period), interest on arrears and other recoveries.
11. If consumer debt is limited to below 90 days, then the actual realistically collectable amount is estimated at R39.9 billion. This should not be interpreted that the National Treasury by implication suggests that the balance must be written-off by municipalities.
12. Metropolitan municipalities are owed R100.4 billion (R84.8 billion reported in the first quarter of 2018/19) in outstanding debt as at 31 December 2018. This represents an increase of R15.6 billion. The largest contributors are the City of Johannesburg, which is owed the largest amount at R35.7 billion, followed by City of Ekurhuleni at R16.1 billion, City of Tshwane at R12.9 billion, and eThekwini at R12.5 billion.
13. Households in metropolitan areas are reported to account for R81.4 billion, or 81.0 per cent, of outstanding debt to metros, followed by businesses, which account for R14.7 billion or 14.6 per cent. Debt owed by government agencies is approximately R2.5 billion, or 2.5 per cent, of the total outstanding debt owed to metros.
14. Secondary cities are owed R36.5 billion (R24.7 billion reported in the second quarter of 2017/18) in outstanding consumer debt. The majority of debt is owed by households, which amount to R23.0 billion, or 63.1 per cent, of the total outstanding debt. Out of the total debt of R36.5 billion, R31.1 billion, or 85.3 per cent, has been outstanding for more than 90 days.
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